Israel’s Finance Ministry has given its approval in principle to Potash Corp. of Saskatchewan Inc.’s request to increase its stake in Israel Chemicals Ltd. (ICL), according Ministry sources. They said the approval would allow PotashCorp to increase its stake from 13.9 percent to 25 percent. The Finance Ministry approval was necessary as the State Owned Corporations Authority still holds a golden share in ICL following its privatization in the 1990s.
“If the application is granted, it will give us one more option in our use of free cash flow when we are making investment decisions,” a PotashCorp spokesman told Green Markets. “It is not a foregone conclusion that we would acquire any additional shares, but we are seeking the flexibility to move beyond our current threshold.”
The Finance Ministry is not the final hurdle for PotashCorp. The request still needs to receive the approval of Israel’s Anti Trust Commission before it can increase its stake. The commission confirmed that PotashCorp’s request is under review.
Several Israeli agricultural organizations have come out against allowing PotashCorp to increase its stake in ICL. The Plant, Citrus, Vegetable and Fruit Councils jointly issued a statement opposing the move. They said they feared that such a move would enable ICL to further take advantage of its monopolistic position in Israel, and that this could have a detrimental impact on local food prices, as well as export prices for agricultural produce.
Israel Plants Production and Marketing Council Chairman Zvi Alon said in a letter to Finance Minister Yuval Steinitz and Attorney General Yehuda Weinstein that Israeli farmers purchase potash and all other fertilizers from ICL, which has been declared a monopoly. He noted that the granting of a sole license to ICL to produce potash and other fertilizers has created a reality of a total absence of competition, and restrictions have made it uneconomical to import fertilizers. Alon said that even though price controls were lifted on potash in 2006, prices have gone up by several hundred percent. Weinstein said that he feared the plight of local farmers could be even more adversely affected if PotashCorp is allowed to increase its stake in ICL.
Israel Corp. owns 52.3 percent of ICL, the country’s largest chemical company. A report in the Calcalist economic daily said that PotashCorp would acquire the additional shares from local investors and not from Israel Corp. Shares in ICL, which have been down dramatically this year, rose sharply on the Tel Aviv Stock Exchange on the news.
Last month, ICL reported a sharp increase in third-quarter revenues and net profits. Revenues rose by 36 percent to $1.9 billion, versus $1.39 billion in the corresponding quarter in 2010. Net profits were up by 80 percent, to $436 million compared to the year-ago $246 million.
In the past, PotashCorp has expressed interest in controlling ICL. However, back in 2006 Israel Corp. said that it was not interested in giving up control. There was some speculation in 2011 that the Ofer family, which owns Israel Corp., might change their mind, as two senior members of the family passed away in 2011.